Motorists could see their insurance premiums slashed by up to £50 a year after the Chancellor announced moves to axe cash claims for minor whiplash injuries.

George Osborne said the Government will look to end the right to cash compensation, making it harder for people to get compensation for exaggerated or fraudulent whiplash claims.

This will save the insurance industry more than £1 billion from the cost of providing motor insurance and "end the cycle in which responsible motorists pay higher premiums to cover false claims by others", according to the Treasury.

The Government expects insurers to pass on an average saving of £40 to £50 per motor insurance policy to consumers.

It will consult on the plans in the new year.

The Treasury will also make changes to allow more injuries to be able to go to the small claims court, by increasing the upper limit for these claims from £1,000 to £5,000.

It estimates that whiplash claims cost the insurance industry £2 billion a year, or £90 per policy, which it said is "out of all proportion to any genuine injury suffered".

Huw Evans, director general of the Association of British Insurers, said: "This is a significant breakthrough in tackling the compensation culture and is good news for motorists."

Insurance giant Aviva also welcomed the whiplash claim announcement in the Autumn Statement and pledged to pass on all of the savings.

A spokesman for the group said: "These measures will directly address motor fraud like crash for cash, reduce the volume of nuisance calls, remove costly lawyers from the process and save motorists more than 10% on their premium."

Steve Maddock, managing director of claims at Direct Line Group added: "Direct Line Group have been calling for further reform for some time and think this could help to reduce claims costs and therefore overall benefit our customers."

But the changes come just weeks after the Government increased the Insurance Premium Tax (IPT), which some have estimated could see families pay an extra £100 a year in cover.

The standard rate of IPT - the tax paid each time an insurance policy is purchased in the UK - increased from 6% to 9.5% from November 1, affecting policyholders including motorists, home owners and pet owners.

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